Arabica coffee futures for July delivery, which fell 3.3%
earlier to 206.85 cents a pound, recovered to stand 0.3% lower at 213.40
cents in New York at 12:30 local time (17:30 UK time).

The recovery followed the announcement by Citigroup that it
had cut by 3.25m bags, to 44.25m bags, its forecast for this year's overall Brazilian
coffee harvest, which many had seen approaching 60m bags before drought struck
main growing areas from December to February.

"I am probably the smallest number on the Street," said Citigroup
futures specialist Sterling Smith although, outside the financial community, a
study commission by Brazil's Conselho Nacional do Café producers' group two
weeks ago estimated the country's coffee production at 40.1m-43.3m bags.

'Smaller crop than
anticipated'

Mr Smith said that estimating the size of Brazil's coffee
crop was unusually difficult this year because of the lack of precedents for
drought early in the calendar year.

"Unusual circumstances this year are making estimating the
crop much more difficult," meaning that Thursday's estimates "will get revised".

However, he told Agrimoney.com: "Everything I am getting on
the ground indicates a smaller crop than anticipated previously, even with the
drought."

The figure also takes into account the dent to production
from heavy tree prunings, which farmers undertook earlier in the season, when
prices fell close to 100 cents a pound in New York.

Mr Smith added that his Brazilian coffee included a
relatively downbeat estimate for the robusta coffee harvest, which Volcafe
pegged at 17.1m bags.

And he flagged the threat too of setbacks from the El Nino
weather pattern, which is associated with strong rains in much of central
Brazil, and which meteorologists have placed as an increasing possibility this
year.

"El Niño worries are back in the conversation as that would
hamper harvest efforts and further damage quality," he said.